GlobeNewswire Inc | Dec 10, 2020 04:05PM EST

December 10, 2020

WALTHAM, Mass., Dec. 10, 2020 (GLOBE NEWSWIRE) -- SeaChange International Inc. (NASDAQ: SEAC), a leading provider of video delivery platforms, today reported financial and operational results for the fiscal third quarter ended October 31, 2020. The Company also reported strong demand from content owners for the Companys new Video Apps platform, which enables content owners to quickly and seamlessly launch direct-to-consumer (DTC) TV and video applications directly through Smart TVs and connected platforms.

SeaChanges New Video Apps Platform Addresses Burgeoning Demand from Content Owners to Deliver High-Quality TV and Video Content Directly to Consumers

-- SeaChanges Video Apps platform addresses the TV and video markets accelerated shift in spending in response to COVID-19 changes in consumer behavior. The global pandemic forced many service providers to invest heavily in technology infrastructure and reduce or eliminate investment in video platforms. Content owners, particularly independent content owners, are now accelerating their content distribution strategies and investments to deliver high-quality content directly to consumers. -- SeaChanges Video Apps allow content owners to quickly launch over-the-top (OTT) TVapps to meet the global demand from consumers looking to stream high-quality video content directly through Smart TVs and connected platforms such as Roku, Amazon Fire TV, Chromecast and Apple TV among others. -- Independent content ownersare focused on advertising to monetize direct-to-consumer TV applications. SeaChanges Video Apps leverages the Companys proprietary Ad Insertion module to automatically source ad buyers, define ad placements, and programmatically fill advertising slots in real-time. With SeaChanges Ad Insertion module and rich data analytics, content owners are provided with greater insights into their audiences and generate higher advertising revenue right away. -- Revenue-share model allows SeaChange to meaningfully participate in the growing OTT market ad spend, which is expected to exceed $14 billion globally by 2023, according to industry analysts. -- Strong customer demand and robust pipeline for Video Apps. Since the launch of the platform in November 2020, SeaChange has secured four (4) wins and is actively engaged in discussions with approximately fifty (50) content owners, who are in varying stages of the sales cycle.

Third Quarter Fiscal 2021 and Recent Operational Highlights

-- Launched Video Apps and established a robust sales pipeline with active discussions with approximately 50 content owners in the first month since the launch of the platform. -- Secured the most meaningful win in Company history with one of the largest mobile network operators in the world for SeaChanges Advertising Solutions. The aggregate potential revenue opportunity over the next three years is approximately $100 million based on the customers annual unsold ad inventory and the revenue share SeaChange would receive to monetize it. -- Secured six (6) new customer wins in the third quarter, including:Framework Video Platform wins;Framework Video Platform with Video Apps wins; andAdvertising Solutions (formerly Unsold) win. -- Secured four (4) new customer wins in the fourth quarter ending January 31, 2021, including:Advertising Solutions wins; andFramework Video Platform with Video Apps win. -- Since SeaChange launched the Framework platform in March 2019, the Company has secured 39 wins worth an aggregate total contract value of approximately $63 million. -- Ongoing cost-optimization measures produced an 8% sequential decrease and 45% year-over-year decrease in operating expenses in the fiscal third quarter of 2021.

Management Commentary

The dramatic shift in service provider spending since the onset of the pandemic has impacted the near-term demand for our Framework video delivery platform, but weve adapted, said SeaChange CEO Yossi Aloni. In recent months weve pivoted to addressing the immediate needs of content owners who are looking to develop an effective over-the-top, direct-to-consumer strategy to stay competitive, monetize content, and build deeper levels of engagement between audience and brand. Historically, for content owners to directly launch a DTC TV service, the process was overly complex, costly and involved disparate technologies. With SeaChanges Video Apps platform, providers can now quickly and seamlessly operate their own streaming service while maintaining a direct relationship with the consumer. Not only does this new approach enhance content owner margins, but it also creates greater long-term business value by enabling full control over the service, data and customer relationship.

Looking ahead, SeaChange is well positioned to enable the industrys ongoing direct-to-consumer movement. Video Apps is providing content owners with the platform to capitalize on the exploding demand in high-quality streaming content and the growing advertising OTT ad spend. Over the next five years, we expect thousands of direct-to-consumer TV Apps will be launched with a need for a built-in ad monetization strategy. Similar to how Wix democratized websites for small to medium businesses, SeaChanges Video Apps platform will look to play a major role in powering and capitalizing on the direct-to-consumer TV apps revolution.

Third Quarter Fiscal 2021 Financial Results

-- Total revenue was $5.0 million compared to $5.0 million in the prior quarter, and $20.5 million in the same period last year. Product revenue was $1.0 million (or 21% of total revenue) compared to $1.1 million (or 21% of total revenue) in the prior quarter, and $13.5 million (or 66% of revenue) in the same period last year. Service revenue was $3.9 million (or 79% of total revenue) compared to $3.9 million (or 79% of total revenue) in the prior quarter, and $7.0 million (or 34% of total revenue) in the same period last year. -- Revenue backlog at quarter end was $21.9 million compared to $20.9 million in the prior quarter, and $22.2 million at the end of the third quarter of fiscal 2020. -- Gross profit was $2.8 million (or 56% of total revenue) compared to $1.8 million (or 36% of total revenue) in the prior quarter, and $15.7 million (or 76% of total revenue) in the same period last year. -- Total operating expenses were $7.3 million compared to $8.0 million in the previous quarter, and $13.4 million in the same period last year. -- GAAP loss from operations totaled $4.6 million compared to a GAAP loss from operations of $6.2 million in the prior quarter, and GAAP income from operations of $2.3 million in the same period last year. -- Non-GAAP loss from operations totaled $3.8 million, or $(0.10) per basic share, compared to a Non-GAAP loss from operations of $5.1 million, or $(0.14) per basic share in the previous quarter, and non-GAAP income from operations of $5.2 million, or $0.14 per fully diluted share, in the same period last year. -- GAAP net loss totaled $5.1 million, or $(0.14) per basic share, compared to a GAAP net loss of $5.8 million, or $(0.15) per basic share in the prior quarter, and a net income of $2.1 million, or $0.06 per fully diluted share, in the same period last year. -- Cash, cash equivalents, and marketable securities totaled $6.2 million at quarter-end. Management expects the Companys cash position at fiscal year-end to be at least $8.5 million. Management currently believes the Companys liquidity position, resources and recently implemented cost-reduction measures will enable the Company to execute its growth strategy.

Conference CallSeaChange will host a conference call today (December 10, 2020) at 5:00 p.m. Eastern time (2:00 p.m. Pacific time) to discuss these results.

SeaChange management will host the call, followed by a question and answer period.

U.S. dial-in number: 877-407-8037International number: 201-689-8037Meeting Number: 13713901

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at 949-574-3860.

The conference call will be broadcast live and available for replay here and via the investor relations section of SeaChanges website. To accompany the call, SeaChange will make available a supplemental slide deck and managements prepared remarks, both of which will be posted in the investors section of SeaChanges website prior to the call.

About SeaChange International, Inc.SeaChange International (NASDAQ: SEAC) powers hundreds of cloud and on-premises platforms with live TV and video on demand (VOD) for more than 50 million subscribers worldwide. SeaChange's end-to-end solution, the Framework, enables operators and content owners to cost-effectively launch a direct-to-consumer video service. This includes back-office, media asset management, ad management, analytics and a client application for set-top boxes (STB), Smart-TVs and mobile devices. Framework is available as a product or managed service, and can be deployed on-premises, in the cloud or as a hybrid. For more information, please visit www.seachange.com.

Safe Harbor ProvisionCertain statements in this press release may constitute forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, as amended to date. Forward-looking statements can be identified by words such as "may," "might," "will," "should," "could," "expects," "plans," "anticipates," "believes," "seeks," "intends," "estimates," "predicts," "potential" or "continue," the negative of these terms and other comparable terminology. Examples of forward-looking statements include, among others, statements we make regarding the expected growth of the OTT market; the outcome of the Companys active discussions with approximately 50 content owners; the Companys aggregate potential revenue over the next three years as a result of its contract win with one of the largest mobile network providers; the aggregate total contract value to be realized from the Companys wins for its Framework platform; the Companys position to enable the industrys ongoing direct-to-consumer movement; the Companys expectation that over the next five years, thousands of direct-to-consumer TV apps will be launched with a need for a built-in ad monetization strategy and the role the Companys Video Apps platform could play in powering and capitalizing on the direct-to-consumer TV apps revolution; the Companys ability to execute its growth strategy, in light of its liquidity position, resources and recently implemented cost-reduction measures, and other statements that are not purely statements of historical fact. These forward-looking statements are made on the basis of the current beliefs, expectations, and assumptions of the management of the Company and are subject to a number of known and unknown risks and significant business, economic and competitive uncertainties that could cause actual results to differ materially from what may be expressed or implied in these forward-looking statements. Risks that could cause actual results to differ include, but are not limited to: the impact of COVID-19 on our business and the economies in which we operate; a lower than anticipated demand for direct-to-consumer TV; the entrance of competitors into the ad insertion space; the continued spending by the Company's customers on video solutions and services and expenses we may incur in fulfilling customer arrangements; the manner in which the multiscreen video and OTT markets develop; the Company's ability to compete in the software marketplace; the loss of or reduction in demand, or the return of product, by one of the Company's large customers or the failure of revenue acceptance criteria in a given fiscal quarter; the cancellation or deferral of purchases of the Company's products; any decline in demand or average selling prices for our products and services; failure to achieve our financial forecasts due to inaccurate sales forecasts or other factors, including due to expenses we may incur in fulfilling customer arrangements; the impact of our cost-savings and restructuring programs; the Company's ability to manage its growth; the risks associated with international operations; the ability of the Company to use its net operating losses, including the potential impact on these losses resulting from the Coronavirus Aid, Relief, and Economic Security (CARES) Act; the impact of changes in the market on the value of our investments; changes in the regulatory environment; and other risks that are described in further detail in the Companys reports filed from time to time with the Securities and Exchange Commission (SEC), which are available at www.sec.gov, including but not limited to, such information appearing under the caption "Risk Factors" in the Company's Annual Report on Form 10-K. Any forward-looking statements should be considered in light of those risk factors. The Company cautions readers that such forward-looking statements speak only as of the date they are made. The Company disclaims any intent or obligation to publicly update or revise any such forward-looking statements to reflect any change in Company expectations or future events, conditions or circumstances on which any such forward-looking statements may be based, or that may affect the likelihood that actual results may differ from those set forth in such forward-looking statements.

SeaChange Contact:Matt GloverGateway Investor Relations949-574-3860SEAC@gatewayir.com

SeaChange International, Inc.Condensed Consolidated Balance Sheets(Unaudited, amounts in thousands)

October 31, January 31, 2020 2020Assets Cash and cash equivalents $ 5,124 $ 9,297Marketable securities 1,034 4,617Accounts and other receivables, net 5,259 12,127Unbilled receivables 19,036 23,310Prepaid expenses and other current assets 4,755 5,112Property and equipment, net 641 554Goodwill and intangible assets, net 11,777 12,075Other assets 5,987 5,798Total assets $ 53,613 $ 72,890Liabilities and Stockholders' Equity Accounts payable and other liabilities $ 11,692 $ 16,341Deferred revenue 3,823 6,181Deferred tax liabilities and income taxes 574 436payablePromissory note 2,413 ?Total liabilities 18,502 22,958Total stockholders' equity 35,111 49,932Total liabilities and stockholders' equity $ 53,613 $ 72,890

SeaChange International, Inc.Condensed Consolidated Statements of Operations(Unaudited, amounts in thousands, except per share data)

For the Three Months For the Nine Months Ended October 31, Ended October 31, 2020 2019 2020 2019 Revenue: Product $ 1,048 $ 13,524 $ 5,212 $ 26,671 Service 3,918 7,020 11,664 21,170 Total revenue 4,966 20,544 16,876 47,841 Cost of revenue: Product 435 466 2,803 4,414 Service 1,755 4,386 6,974 13,939 Total cost of 2,190 4,852 9,777 18,353 revenueGross profit 2,776 15,692 7,099 29,488 Operating expenses:Research and 3,024 4,033 10,550 12,060 developmentSelling and 1,636 3,859 5,490 9,674 marketingGeneral and 2,636 3,265 7,057 11,664 administrativeSeverance andrestructuring 53 2,282 1,082 3,152 costsTotal operating 7,349 13,439 24,179 36,550 expenses(Loss) income (4,573 ) 2,253 (17,080 ) (7,062 )from operationsOther expense, (499 ) (161 ) (334 ) (2,030 )net(Loss) incomebefore income (5,072 ) 2,092 (17,414 ) (9,092 )taxesIncome taxprovision 45 (53 ) (21 ) (214 )(benefit)Net (loss) income $ (5,117 ) $ 2,145 $ (17,393 ) $ (8,878 )Net (loss) income $ (0.14 ) $ 0.06 $ (0.46 ) $ (0.24 )per share, basicNet (loss) incomeper share, $ (0.14 ) $ 0.06 $ (0.46 ) $ (0.24 )dilutedWeighted averagecommon shares 37,556 36,751 37,436 36,606 outstanding,basicWeighted averagecommon shares 37,556 37,752 37,436 36,606 outstanding,diluted Comprehensive loss:Net (loss) income $ (5,117 ) $ 2,145 $ (17,393 ) $ (8,878 )Othercomprehensive (loss) income,net of tax:Foreign currencytranslation (143 ) 59 1,498 1,399 adjustmentUnrealized(losses) gains on (33 ) 31 (37 ) 91 marketablesecuritiesTotal othercomprehensive (176 ) 90 1,461 1,490 (loss) incomeComprehensive $ (5,293 ) $ 2,235 $ (15,932 ) $ (7,388 )(loss) income

SeaChange International, Inc.Condensed Consolidated Statements of Cash Flows(Unaudited, amounts in thousands)

For the Nine Months Ended October 31, 2020 2019 Cash flows from operating activities: Net loss $ (17,393 ) $ (8,878 )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization expense 1,105 1,622 (Recovery of) provision for bad debts (216 ) 480 Stock-based compensation expense 1,054 554 Deferred income taxes 246 (203 )Realized and unrealized foreign currency transaction 1,498 1,399 lossOther (26 ) 97 Changes in operating assets and liabilities: Accounts receivable 7,084 5,456 Unbilled receivables 4,274 (11,215 )Inventory ? 720 Prepaid expenses and other current assets and other 539 469 assetsAccounts payable (1,242 ) (1,079 )Accrued expenses and other liabilities (3,886 ) 535 Deferred revenue (2,358 ) (2,977 )Net cash used in operating activities (9,321 ) (13,020 )Cash flows from investing activities: Purchases of property and equipment (311 ) (252 )Cash paid for acquisitions, net ? (3,838 )Purchases of marketable securities ? (852 )Proceeds from sales and maturities of marketable 3,576 3,343 securitiesNet cash provided by (used in) investing activities 3,265 (1,599 )Cash flows from financing activities: Proceeds from issuance of common stock 137 66 Repurchases of common stock (80 ) (142 )Proceeds from Paycheck Protection Program 2,413 ? Net cash provided by (used in) financing activities 2,470 (76 )Effect of exchange rate on cash and cash equivalents (587 ) 265 Net decrease in cash, cash equivalents and restricted (4,173 ) (14,430 )cashCash, cash equivalents and restricted cash at 9,297 20,317 beginning of periodCash, cash equivalents and restricted cash at end of $ 5,124 $ 5,887 periodSupplemental disclosure of cash flow information Income taxes paid $ 196 $ 454 Non-cash activities: Purchases of property and equipment included in $ ? $ ? accounts payableRight-of-use assets obtained in exchange for lease $ 987 $ 2,952 obligationsFair value of common stock issued in acquisition $ ? $ 874

Non-GAAP MeasuresWe define non-GAAP income (loss) from operations as U.S. GAAP net loss plus stock-based compensation expenses, amortization of intangible assets, non-operating expense professional fees, severance and other restructuring costs, loss on impairment of goodwill and long-lived assets, other expense, net, and income tax (benefit) provision. We discuss non-GAAP income (loss) from operations in our quarterly earnings releases and certain other communications, as we believe non-GAAP operating income (loss) from operations is an important measure that is not calculated according to U.S. GAAP. We use non-GAAP income (loss) from operations in internal forecasts and models when establishing internal operating budgets, supplementing the financial results and forecasts reported to our Board of Directors, determining a component of bonus compensation for executive officers and other key employees based on operating performance and evaluating short-term and long-term operating trends in our operations. We believe that the non-GAAP income (loss) from operations financial measure assists in providing an enhanced understanding of our underlying operational measures to manage the business, to evaluate performance compared to prior periods and the marketplace, and to establish operational goals. We believe that the non-GAAP financial adjustments are useful to investors because they allow investors to evaluate the effectiveness of the methodology and information used by management in our financial and operational decision-making.

Non-GAAP income (loss) from operations is a non-GAAP financial measure and should not be considered in isolation or as a substitute for financial information provided in accordance with U.S. GAAP. This non-GAAP financial measure may not be computed in the same manner as similarly titled measures used by other companies. We expect to continue to incur expenses similar to the financial adjustments described above in arriving at non-GAAP income (loss) from operations and investors should not infer from our presentation of this non-GAAP financial measure that these costs are unusual, infrequent or non-recurring. The following table includes the reconciliations of our U.S. GAAP (loss) income from operations, the most directly comparable U.S. GAAP financial measure, to our non-GAAP (loss) income from operations for the three and nine months ended October 31, 2020.

SeaChange International, Inc.Fiscal Year Reconciliation of GAAP to Non-GAAP(Unaudited, amounts in thousands, except per share and percentage data)

For the Three Months For the Nine Months Ended October 31, Ended October 31, 2020 2019 2020 2019 (Amounts in (Amounts in thousands) thousands)GAAP net (loss) income $ (5,117 ) $ 2,145 $ (17,393 ) $ (8,878 )Other expense, net 499 161 334 2,030 Income tax provision 45 (53 ) (21 ) (214 )(benefit)GAAP (loss) income from $ (4,573 ) $ 2,253 $ (17,080 ) $ (7,062 )operationsAmortization of intangible 308 295 891 893 assetsStock-based compensation 437 357 1,054 554 Professional fees - other ? ? ? 1,180 Severance and other 53 2,282 1,082 3,152 restructuring costsNon-GAAP (loss) income from $ (3,775 ) $ 5,187 $ (14,053 ) $ (1,283 )operations Net loss per share pernon-GAAP (loss) income from (0.10 ) 0.14 (0.38 ) (0.04 )operations, basicNet loss per share pernon-GAAP (loss) income from (0.10 ) 0.14 (0.38 ) (0.04 )operations, dilutedWeighted average common 37,556 36,751 37,436 36,606 shares outstanding, basicWeighted average common 37,556 37,752 37,436 36,606 shares outstanding, diluted

SeaChange International, Inc.Supplemental Schedule - Revenue Breakout(Unaudited, amounts in thousands)

Three Months Ended Nine Months Ended October 31, October 31, 2020 2019 2020 2019 (Amounts in thousands) (Amounts in thousands)Product revenue: Framework $ ? $ 13,127 $ 1,333 $ 21,371OVP and other 994 856 2,406 3,314Hardware 54 (459 ) 1,473 1,986Total product revenue 1,048 13,524 5,212 26,671Service revenue: Maintenance and support 2,419 5,812 7,632 16,048Framework and support 1,011 623 2,920 734servicesProfessional services and 488 585 1,112 4,388otherTotal service revenue 3,918 7,020 11,664 21,170Total revenue $ 4,966 $ 20,544 $ 16,876 $ 47,841